Australian Unity leads by example

Australian Unity is a unique business in Australia, as a mutual entity with operations in investment management, banking and healthcare. With its community and social values framework as a touchstone, Matthew Moore, head of responsible investment and stewardship at Australian Unity in Sydney, says the company deploys consistent responsible investment principles across its investment decisions.

What makes Australian Unity’s community and social values (CSV) framework unique?

Australian Unity is one of Australia’s original mutuals and social enterprises, founded by community leaders who believed in the power of collective endeavour and shared value to address the most pressing challenges of the day. Our CSV framework supports us in staying true to our community roots and allows us to measure and forecast potential social impact across our diverse business portfolio.

We are concerned with the real wellbeing of all Australians. This means more than physical health – it relates to overall quality of life. We have been measuring the wellbeing of Australians with Deakin University for more than 22 years via the Australian Unity Wellbeing Index. It has become one of the most enduring and credible studies of subjective wellbeing in Australia. Since its introduction, we have used the index to inform the design and delivery of our diverse health, wealth and care portfolio.

How is the business integrating environmental, social and governance (ESG) principles with its investments?

For our funds management businesses, our first priority is to implement a consistent set of principles for responsible investment management across our various offerings, and for these to guide our annual reporting and disclosure.

We are currently drafting responsible investment policies and working on a methodology to score each of our listed and unlisted security holdings. This will set the foundation for our business and support the net zero transition plan, as well as our reporting in line with the Task Force on Climate-related Financial Disclosures (TCFD).

Australian unity's responsible investment framework covers five key areas

Intent, Having a clear statement of vision, scope and depth - framed by Australia Unity's identity and purpose
Policies, a suit of policies that translate into guidelines for what Australian Unity does
Integration, The effective embedding and implementation of policy at operation level
Stewardship, Championing intent internally and externally
Reporting, Ensuring transparency and disclosure, and ability to measure impact

Australian Unity acquired Altius Asset Management in 2020. How does this arrangement work?

Altius is Australian Unity’s specialist cash and fixed-interest manager with a broad set of capabilities. It applies a responsible investment philosophy, including sustainable investment, across its discrete mandates and managed funds.

The group was established as a joint venture with Australian Unity in 2011. Alignment with Australian Unity’s values was essential for Altius’s successful transition from joint venture partner to wholly owned boutique, with the founders still leading the business today.

Australian Unity brings institutional oversight to Altius and is a strong, experienced and well-resourced partner able to provide support and infrastructure in the areas of finance, business continuity and human resources. This allows Altius to focus on what it does best: managing money responsibly on behalf of investors.

Australian Unity’s ambition is to become a leader in responsible investment and stewardship, focusing on corporate sustainability, ESG and practices aligned with the SDGs [UN Sustainable Development Goals]. Rather than merely adopting current market practices in these areas, Australian Unity’s strategy is to create a unique and compelling approach to responsible investment and stewardship across its many spheres of operation. For investors, this means greater opportunity to drive positive social impact as well as superior long-term investment outcomes.

As a recognised leader in responsible investment practices, Altius manages Australian Unity’s cash and fixed-interest investments including on behalf of the Australian Unity Group. It was responsible for A$1.9 billion (US$1.4 billion) in funds under management as at 30 September 2022.

How does your role – head of responsible investment and stewardship at Australian Unity – interact with Altius?

I am responsible for implementing the responsible investment framework, which includes the activities of Altius. I also chair the Altius sustainability advisory committee (SAC), which I have been a member of since the inception of Altius’s Sustainable Bond Fund in 2014.

The SAC oversees Altius’ cash and fixed-interest sustainability policy – which is integral to its responsible investment approach. This committee is charged with using its combined knowledge of ESG issues, financial market expertise and insights to provide recommendations and guidance. The committee does not make investment decisions but debates and informs the development of investment policies and assists Altius’s investment team in making judgements that define the investible universe for its funds.

I also recently worked closely with the Altius team in the creation of its inaugural impact report. Prepared in collaboration with the Australian Institutional Shareholder Services (ISS) ESG team, the report’s methodology brings global best practice ESG reporting to Australia, adding depth and sophistication to climate risk reporting across Altius’s domestic bond portfolios.

The report covers Altius’ three sustainable cash and fixed-interest funds – Altius Sustainable Bond Fund, Altius Sustainable Short Term Income Fund and Altius Green Bond Fund. It provides investors with previously unreported data measuring environmental and social performance as well as assessing evolving metrics modelled under the International Energy Agency’s environmental benchmarks and scenarios.

The report also highlights Altius’s engagement activities with prominent issuers on topics such as climate change, corporate misconduct, gambling, alcohol and human rights. This proactive engagement enables Altius to advocate on key sustainability issues that are important to its investors.

What plans do Altius and Australian Unity have for further enhancing their ESG investing and reporting credentials?

Proactively managing and reporting on the risks associated with ESG issues is essential for proper stewardship and leads to better risk-reward outcomes for investors. Altius continues to improve and develop its processes to maintain a high standard of governance and reporting. For example, Altius’s sustainability advisory committee is working on a more targeted approach to engagement and, as part of its inaugural impact report, acknowledges the increased depth and transparency of its reporting framework.

In an era of greenwashing, Altius’s impact report brings together globally recognised ISS reporting frameworks to provide investors with increased visibility and transparency. It also enables investors to measure the impact of their capital more effectively, while holding Altius accountable to additional criteria in the long term.

In 2022, Australian Unity also elevated reporting on its environmental impact. This supports our approach to deliver a net zero strategy in the coming 12 months – something that is credible and increases transparency and outcomes-based reporting.

More generally, the recent RIAA [Responsible Investment Association Australasia] benchmark report highlighted the increase in impact reporting during 2021. Investors have experimented with new tools to convey messages about the positive impacts and outcomes their investments deliver, alongside financial returns.

Outcomes aligned with the SDGs are most common – which is something we are doing at Australian Unity. However, alternative impact measurement tools are being created and are set to increase in 2023.

How will development of disclosure and reporting regimes affect Australian Unity and Altius’s investment practices?

The Australian government has embarked on several initiatives that aim to change the way corporates and investors interact with each other, and appears likely soon to introduce mandatory climate reporting with a period of consultation to commence before the end of 2022.

Disclosure frameworks and taxonomies are continually being developed around the world, requiring us to monitor and identify the implications for Australian Unity and its funds management businesses, including Altius. Australian Unity supports the Australian government’s emissions reduction targets, of 43 per cent by 2030 and net zero emissions by 2050. We are actively identifying opportunities and strategies to enable the group to reach these targets sooner.

For example, the establishment of a credible net zero transition plan, including an assessment of Altius’s alignment to the Paris Agreement, is a key focus for the next 12 months. This will inform our net zero transition plan. We welcome mandatory climate reporting as it supports our approach to increase transparency for investors and accountability for fund managers.

What comments might you provide to public consultation on Australia’s mandatory climate reporting regime?

We are encouraged by recent comments from the Australian government regarding greater transparency on climate-related risks and opportunities. We operate in an increasingly complex environment with growing expectations of transparency. Any harmonisation within the industry that supports a globally consistent, comparable, reliable, credible and verifiable reporting system should be applauded.

Above all, we see this as one of the key measures of success for reporting – to support investors to make better decisions when allocating capital.